The SEC has issued a new ruling on stablecoins, and it couldn’t have landed better for Trump and his newly launched crypto project. On Monday, the Division of Corporation Finance released updated guidance that introduces the term “Covered Stablecoins.”
These are tokens that stay pegged to the U.S. dollar on a one-to-one basis, are fully backed by liquid, low-risk assets, and can be redeemed at any time.
The rule defines these as instruments not covered by securities laws, which gives a clear path forward for projects like USD1, the stablecoin rolled out by World Liberty Financial, a firm backed by President Donald Trump and his family.
The guidance says Covered Stablecoins don’t qualify as securities under the Reves test, because buyers aren’t chasing profit. Instead, they’re just trying to move or store money in crypto form. The coins are backed by a reserve of assets, like USD, that can handle redemptions at any time.
They’re not marketed as investments, and the people who buy them aren’t looking to make money off someone else’s business efforts.
SEC breaks down how Covered Stablecoins dodge securities law
The SEC says the main reason Covered Stablecoins don’t fall under securities laws is because of how they work. People don’t buy them expecting a return, and the companies behind them don’t promote them that way.
The cash collected from token sales is used to fill the reserve, which is held in safe, easy-to-access assets like dollars, Treasuries, or their equivalents. The agency said the reserve setup makes the coins less risky and removes the need for securities rules.
In its statement, the SEC said risk-lowering features include whether the coins are “collateralized or insured or are subject to another regulatory scheme that significantly reduces the risk of the instrument, thereby rendering application of the Securities Acts unnecessary.”
The Division pointed out that Covered Stablecoin issuers “maintain a Reserve designed to satisfy fully their redemption obligations,” made up of USD and similar assets that let issuers “honor all redemptions on demand.”
On top of Reves, the SEC also applied the Howey test for anything not already classified under other definitions in the Securities Act. Under Howey, an asset becomes a security if it involves an investment of money into a common setup with a reasonable expectation of profit coming from someone else’s work. But in this case, that doesn’t apply.
The Division said buyers aren’t entering with hopes of profit. They’re not investing in a business. They’re just using crypto that works like cash. The agency said these kinds of buyers “are motivated by a desire to use or consume the item purchased,” not by “prospects of a return on their investment.” Since federal securities laws don’t apply to consumer transactions, Covered Stablecoins are clear.
The report also clarified that Covered Stablecoins aren’t being promoted or sold as a way to make money. Instead, they’re being offered for what they are—tools to send, hold, or use dollars digitally. That’s it.
Meanwhile, since launching in October, World Liberty Financial has raised $550 million through two token sales. The most recent one brought in $250 million, announced just last week. The firm calls itself a crypto banking platform, and it says that Trump family–connected entities could receive up to 75% of the venture’s net revenue.
The sales have pulled in over 85,000 verified participants, with some well-known names jumping in. One of them is Justin Sun, founder of Tron, who put in $75 million in January while negotiating with the SEC over a civil fraud case.
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